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On 7 August 2023, Treasury released exposure draft legislation to introduce new exemptions from holding an Australian financial service licence (AFSL) for foreign financial service providers (FFSPs).The exposure draft legislation is available here.  In addition, today the Australian corporate regulator, ASIC, announced an extension of 12 months for the transitional arrangements for the current FFSP exemptions, the passporting exemptions and limited connection exemption, which will now expire on 31 March 2025.


  • The passporting exemptions and limited connection exemption from the need to hold an Australian financial services licence (AFSL) that have been used by foreign financial services providers (FFSPs) since 2003 are due to expire on 31 March 2024 (see our earlier article of 2 August 2022).  
  • The consultation in relation to the expiry and replacement of those exemptions had originally proposed that they would be replaced by the ‘foreign AFSL’ regime and the ‘funds management exemption’ (see our earlier article of 11 March 2020).
  • In the May 2021 Australian Federal budget, the Treasurer announced a further consultation in relation to potentially restoring the passporting and limited connection exemptions. That consultation led to proposals in relation to alternative exemptions for FFSPs, in the form of the ‘comparable regulator exemption’ and the ‘professional investor exemption’.
  • A bill to introduce the ‘comparable regulator exemption’ and the ‘professional investor exemption’ (see our previous articles of 20 December 2021 and 18 February 2022) was introduced into the House of Representatives in February 2022 (Old Bill) but lapsed on the calling of the Australian federal election, creating uncertainty again for FFSPs (see our earlier article of 11 April 2022).

What has happened?

On 7 August 2023, Treasury released exposure draft FFSP AFSL exemption legislation (New Bill) which is based on the Old Bill but with modifications, and which seeks to introduce, with effect from 31 March 2024:

  • a comparable regulator exemption;
  • a professional investor exemption;
  • a market maker exemption; and
  • an exemption from the fit‑and‑proper person assessment to fast‑track the licensing process for FFSPs authorised to provide financial services in a comparable regulatory regime.

The key changes compared to the Old Bill are:

  • the introduction of the market maker exemption in respect of derivatives that are able to be traded on certain licensed markets. FFSPs relying on the market maker exemption:
    • must notify ASIC as soon as practicable (and before the 15th business day) after the first time that they start to use the exemption.  The content of the notice is equivalent to the notices required under the professional investor exemption and comparable regulator exemption; and
    • must comply with the same conditions as FFSPs relying on the professional investor exemption with the exception of the requirement to give a written notice to each new professional investor client stating that the FFSP is exempt from the requirement to hold an AFSL;
  • the professional investor exemption now has a limitation in relation to the scope of financial services it covers. It does not extend to dealings in certain products (to be prescribed by regulations to be released) tradeable on certain markets (also to be prescribed by regulations to be released). The narrowing of this exemption is intended to protect markets that may have retail investor involvement against potential impacts from activity by FFSPs that do not hold an AFSL;
  • the introduction of:
    • a condition to provide services efficiently, honestly and fairly in relation to Australian financial products and markets (as applicable), which are subject to exemptions intended to limit the operation of the condition to financial services in relation to activity in Australian financial markets only.  Derivatives whose ‘underlying asset’ are located outside of Australia are also exempt from the ‘efficiently, honestly and fairly’ condition; and
    • accompanying this new condition, expanded ASIC powers to cancel the professional investor exemption, comparable regulator exemption and market maker exemption in respect of a FFSP if ASIC reasonably believes that the FFSP has contravened the efficiently, honestly and fairly condition.  This standard is commensurate with ASIC’s powers to cancel a FFSP’s exemption in respect of ‘fit and proper’ person requirements.

Importantly the following exemption features have not changed from the Old Bill:

  • the professional investor exemption still permits marketing trips to Australia of up to 28 calendar days per year; and
  • the financial services provided under the comparable regulator exemption must be provided from the home jurisdiction of the FFSP or in Australia. This means that the financial services cannot be provided by the FFSP from another jurisdiction (for example, a jurisdiction which is geographically closer to Australia), even if it is regulated in that other jurisdiction to a comparable extent to Australia or the home jurisdiction.

In addition, today ASIC announced an extension of 12 months for the transitional arrangements for the passporting exemptions and limited connection exemption, so that they will expire on 31 March 2025, rather than 31 March 2024.

ASIC is also delaying the commencement of the funds management AFSL exemption (which may be used by FFSPs to provide financial services from offshore to certain categories of Australian professional investors) by 12 months, to 1 April 2025.

ASIC has effected these changes by issuing ASIC Corporations (Amendment) Instrument 2023/588.

What happens next?

Submissions are due by 8 September 2023. Herbert Smith Freehills will be making a submission.  If you would like any assistance in preparing your submission please feel free to reach out to us.   
Until the passporting exemptions and limited connection exemption expire on 31 March 2025: 
  • ASIC will continue to consider new applications for individual temporary licensing relief, or new standard or foreign AFS licence applications, from entities that cannot rely on the transitional relief; and
  • FFSPs that have been granted a ‘foreign AFSL’ will be able to continue to operate under that licence.

Key contacts

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Fiona Smedley

Partner, Sydney

Fiona Smedley
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Ewan MacDonald

Special Counsel, Sydney

Ewan MacDonald
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Yorick Ng

Special Counsel, Sydney

Yorick Ng

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